Mexico may impose tariffs over proposed U.S. electric car tax credit

Mexican Economy Minister Tatiana Clouthier gestures during an interview with Reuters in Mexico City, Mexico, on January 11, 2021. REUTERS/Dave Graham

MEXICO CITY, Dec 2 (Reuters) – A proposed U.S. electric vehicle tax credit is “discriminatory”and Mexico is analyzing a range of legal actions in response that may include tariffs, Mexican Economy Minister Tatiana Clouthier said on Thursday.

“In the past we have imposed tariffs and we would have to do or propose something very important and strategic for those products, in those places where it hurts them … so that the consequences can be felt,” Clouthier told a news conference.

Clouthier said this was “not a desirable” course of action, but underscored that Mexico would do everything in its power to safeguard its automotive industry, which directly employs around one million people.

The U.S. Congress is considering a new $12,500 tax credit that would include $4,500 for union-made U.S. electric vehicles. Only U.S. built vehicles would be eligible for the $12,500 credit after 2027, under a House proposal.

Clouthier, who called the measure “totally contrary to free trade,” had previously rebuked the United States for pursuing what she described as protectionist policies that were liable to backfire and spur immigration.

She made a similar argument on Thursday, saying “the effect on our auto exports would have a very large impact on this sector that creates a lot of jobs … and could even generate additional migratory pressures.”

In late October, Mexico, along with the European Union, Germany, Canada, Japan, France, South Korea, Italy and other countries wrote U.S. lawmakers saying the proposed electric vehicle tax credit violates international trade rules.

The proposal has been backed by U.S. President Joe Biden, the United Auto Workers (UAW) union and many congressional Democrats, but opposed by major international automakers, including Toyota Motor Corp (7203.T), Volkswagen AG (VOWG_p.DE), Daimler AG, Honda Motor Co, Hyundai Motor Co (005380.KS) and BMW AG (BMWG.DE).

Reporting by Anthony Esposito; Editing by Drazen Jorgic, Cynthia Osterman, Angus MacSwan and Richard Chang

Our Standards: The Thomson Reuters Trust Principles.